1.

Pre-investment phases
a. Project Identification
Project identification is the process of identifying investment
opportunities that would either address problems constraining the
achievement of development objectives or maximize development
potential.
Sources of Project Identification
Ways of identifying a project:
•development plans at national and regional levels
•people’s initiatives(interest groups/beneficiaries)
•Initiatives from private sponsors/enterprises
•international funding institutions/donors.

Other sources of project identification:

•government departments
•existing programs
•sector studies
•technical and market linkages.

Project Identification Expectations from this Phase

•To determine existing needs, or potential deficiencies of existing facilities or activities
•To establish the concepts that provide strategic guidelines
•To identify initial technical, environmental, and economic considerations of the project
•To examine alternative ways to accomplish the desired objectives
•To make initial assessments of costs, time frame and the exact scope of project
•To select an initial project design.

b. Project formulation/Preparation
Project preparation involves two major steps:
 the conduct of a Project Feasibility Study (Project FS); and
  detailed planning and analysis (which follows FS preparation).

Project Feasibility Study

 The conduct of a project feasibility study aims to ascertain the soundness of a
project investment decision by evaluating the project’s viability and sketching how
and when it will be endeavored.
 For “large” projects, the FS is often conducted at two levels: (1) the pre-feasibility
study; and (2) the feasibility study proper.

Project Preparation and the Project Feasibility Study

The Project Feasibility Study looks into:
 Market Aspects = Demand & supply analysis
 Technical Aspects =Technical or engineering, manpower & admin. support
 Financial Aspects = Financial analysis
 Economic Aspects = Economic analysis
 Operational Aspects =Social, institutional, environmental, risk analysis

Project Preparation and the Project Feasibility Study

Market Aspects
•Demand Analysis -involves the estimation of present and future market demand for the
output and major inputs of the proposed project.
•Supply Analysis -involves the evaluation of supply conditions expected to prevail during
the project’s life.
Project Preparation and the Project Feasibility Study
Technical Aspects
•What are alternative ways of implementing the project?
•Consider size, location, timing, technical configuration and specifications, resource
requirements, phasing of implementation, and social acceptability.

Project Preparation and the Project Feasibility Study

Financial Aspects
Objectives:
•assessment of financial feasibility/viability
•assessment of financial impact and debt servicing capacity
•judgment of efficient resource use
•assessment of incentives
•provision of sound financing plan
•coordination of financial contributions
•assessment of financial management competence.

Project Preparation and the Project Feasibility Study

Financial Aspects
•Projecting financial cash flows
•Nominal vs. real prices
•Who gains, who loses --beneficiaries’ viewpoint
•Financial cost recovery & sustainability
•Fiscal impact --government’s viewpoint (national, local)

Project Preparation and the Project Feasibility Study

Economic Aspects
Questions asked:
•Will the project’s implementation improve the economic welfare of the country
or region?
Are benefits and costs measured from the point of view of the whole economy?
Steps:
•Demand and supply analysis (from market study)
•Least cost analysis
•Cost-benefit analysis

Project Preparation and the Project Feasibility Study

Economic Aspects
•Identifying, Measuring, and Valuing
•economic costs
•economic benefits
•Market Prices vs. “Shadow” Prices
•Dealing with Externalities
•positive spill overs
•negative spill overs
Project Preparation and the Project Feasibility Study
Social & Distributional Aspects
•Contribution to poverty reduction
•Distribution of project benefits & project costs
•Gender issues
•Cultural issues
•Actions to mitigate social risks
Project Preparation and the Project Feasibility Study
Institutional Aspects
•Implementation capacity
•Distribution of responsibilities
•Quality of governance
•Technical assistance needs
•Independent evaluation arrangements

Project Preparation and the Project Feasibility Study

Operational Aspects
•Can the project be implemented considering the political, legal, organizational,
managerial, institutional, and other administrative constraints that may interfere in the
process of project implementation and operation?
Project Preparation and the Project Feasibility Study
Expectations from this Phase
•Preparation of detailed plans to support the facility
•Indication of possible technical packages to be considered
•More realistic assessment of costs, time schedule, and operational requirements
•Identification of areas where high risk and uncertainty exist.
•Firm identification of resources
•Determination of necessary support systems
•Identification of procedures, budget and funding papers.

c. Detailed design
•Implementing agencies:
•detail the basic programs
•allocate the tasks
•determine resource availabilities
•complete the blueprints and specifications

d. Project Appraisal & Financing

•Project Appraisal and Financing involves the evaluation of the project both
from the stand point of decision maker (who decides whether to implement the
project or otherwise) and the financier (from whom financing is sought).

2. Investment Phase steps

a. Detailed project Engineering
 Detailed engineering consists of all advanced technical operations
necessary to carry the project from the preliminary engineering level to that
stage where actual procurement, construction and/or installation work may
be started.
b. Project Implementation
 Project Execution System-the system must be designed to forestall
problems and resolve them as soon as they occur.
 Monitoring and Evaluation –starts from the time that detailed designs are
made and carried on through actual project implementation.
Reference:
Alonzo, R.P. The Project Cycle. UPecon Foundation. Retrieved on 28 August 2017 from
http://www.upecon.org.ph/epdp/wp-content/uploads/2017/04/3-RAlonzo_Project-
Development-Aspects.pdf.
 Investment phase_Chapter4
http://siteresources.worldbank.org/INTURBANDEVELOPMENT/Resources/3363
87-1319755058239/Chapter4.pdf
Project cycle
http://www.upecon.org.ph/epdp/wp-content/uploads/2017/04/3-RAlonzo_Project-
Development-Aspects.pdf
project cycle_project development
http://jnnurm.nic.in/wp-content/uploads/2012/05/Project%20Development.pdf